Gen Z’s credit scores are dropping sharply, and Trump’s student loan crackdown is the primary reason.

(SeaPRwire) –   The Trump administration’s aggressive push to resume student loan collections has resulted in a record number of borrowers falling behind. This shift is having a lasting negative impact, as a generation of young Americans sees their credit scores plummet.

In the United States, credit scores are a fundamental element of personal finance, determining eligibility for competitive loans and credit cards, and sometimes even influencing job applications. Maintaining a strong credit profile is particularly vital for young adults, who rely on favorable financial terms and career opportunities as they navigate major life milestones.

Because they lack a long-established credit history, members of Generation Z are also the most vulnerable to significant score decreases when financial setbacks occur.

Gen Z Most Affected by Falling Credit Scores

Credit scores are trending downward for the general population. According to a Tuesday report from FICO, the national average credit score slipped to 714 during the second half of 2025. This is a decrease from the 715 average seen in the first half of the year and represents the lowest point since the start of 2020.

FICO noted in September that 2025 marked the worst year for U.S. consumer credit quality since the 2008 financial crisis, with delinquencies on personal loans, auto loans, and credit cards reaching their highest levels since 2009. While the 2009 low of 686 was significantly deeper, the national average had reached a record high of 718 in 2023 before the current downward trend began.

While the majority of Americans saw only minor declines and maintained “prime” credit status—typically defined as the high 600s to low 700s—younger borrowers are facing a more difficult situation. Although only about 10% of all Americans experienced a score drop of 50 points or more between 2024 and 2025, that figure rose to 14.4% for individuals aged 18 to 29.

Various factors can lead to a major credit downgrade, such as opening several new credit accounts. However, the FICO report highlights that a primary cause for the decline in Gen Z’s creditworthiness is an increase in missed loan payments, particularly regarding student loan debts.

Last year, more than 7 million student loan borrowers had new delinquencies reported, leading to an average score drop of 62 points for those affected. A decline of this magnitude can remove consumers from prime borrowing categories, potentially resulting in higher interest rates, limited job prospects, and greater obstacles to homeownership for Gen Z.

Student Loan Delinquencies Reach Record Levels

Since student loan payments fully resumed at the end of 2024, delinquencies have climbed steadily. Department of Education data indicates that a record 7.7 million borrowers defaulted on $181 billion in federal student loans by the end of last year, while another 3 million individuals missed their payment deadlines by at least 90 days.

These payments were suspended between 2020 and 2023 as part of the Biden administration’s pandemic relief measures. While some exemptions initially protected borrowers from negative credit reporting after the restart, those protections have largely been removed since Donald Trump took office.

Earlier this month, a federal court ruled against a major affordable repayment initiative introduced by Joe Biden, meaning millions of participants will soon be required to resume payments.

A February report from the Century Foundation, a progressive think tank, found that nearly 7.9 million student loan recipients experienced a delinquency in the first three quarters of 2025. This represents a quarter of all due payments, roughly triple the rate seen before the pandemic. The report attributed much of this to the current administration’s policies, including a freeze on applications for income-driven repayment plans.

The Century Foundation also noted a sharp decline in credit scores among these borrowers. Approximately 2 million people facing student loan delinquencies last year saw their scores drop by an average of 100 points, falling from 680 to 580. Such a low score makes it nearly impossible to secure good loan terms or rent apartments, as many landlords require a minimum score of 650. Furthermore, only 1.2% of mortgages in 2024 were granted to borrowers with scores below 580.

The long-term effects of this widespread credit downgrading are substantial. Because negative information usually stays on a credit report for seven years, a generation of young professionals may struggle to secure housing, pass employment background checks, or access affordable loans for nearly a decade. Recent analysis suggests that student loan defaults are occurring every nine seconds, a trend that could hinder Gen Z’s economic progress well into the 2030s.